By Barbara Ortutay
Daily Bruin Senior Staff
For the first time in seven months, the Dow Jones Industrial
Average dropped below 10,000 Wednesday, largely due to a poor
earnings report by IBM.
The Dow closed at 9,975.02 after recovering from more than a
400-point loss during the day.
“There are 30 stocks in the Dow Jones, so if IBM drops 16
percent, that accounts for some of it,” said Michael Brennan,
professor of finance at The Anderson School at UCLA.
In addition to the fall in IBM stock, Brennan said the
continuing crisis in the Middle East also contributed to recent
drops in the stock market.
“The economy is slowing down,” he said, adding that
the effects probably will not be noticeable until after
elections.
Bill Barker, an investment strategy consultant with Dain
Rauscher, told the Associated Press the worst may not be over.
“Oil is still high, the euro is down and the Middle East
is still in a potentially explosive situation,” he said.
Although 10,000 has come to be seen as a benchmark for the
health of the economy in recent months, Brennan cautioned against
viewing it as such.
Wednesday’s drop, while dragging the Dow into the
quadruple digits, still only amounted to a loss of 1.14
percent.
“This is a small amount for a given day,” Brennan
said. “The market was clearly too high, and now we are
getting a dose of reality.”
The reason behind IBM’s disappointing performance was that
it did not meet the high earnings the company forecasted earlier,
according to Brennan.
Matt Woelbern, a first-year student at The Anderson School, said
he was not surprised by the drop.
“I saw it coming. I didn’t know it closed at that
amount, but I wasn’t surprised,” he said.
As for stockholders themselves, first-year Anderson School
student Zack Sterngold said he is not worried about his
portfolio.
“I have faith in my companies,” he said.
Sterngold said he has a biotechnology and technology portfolio
and that they are “hanging in there.”
The Nasdaq composite index, which is composed mostly of
technology stocks, also dropped by 42.40 points, which amounted to
a 1.32 percent loss.
“The expectations were that there was a lot of money to be
made on the Internet,” Brennan said. “This was
completely out of line.”
With reports from Daily Bruin wire services.